Sprint needs — and can handle — next iPhone, analyst says

While some investor buzz predicts the possible demise of Sprint Nextel Corp. for taking on the next iPhone, a Guggenheim Partners LLC analyst posed Friday that the Overland Park-based wireless carrier could perish without it.

Sometime in the summer, Apple Inc. (Nasdaq: AAPL) is expected to roll out a version of the iPhone that works with Long Term Evolution, or LTE, network technology. There has been some speculation about whether Sprint will get to carry the next iPhone.

Guggenheim’s Shing Yin says capturing the next iPhone is important to Sprint (NYSE: S) because otherwise it could lose significant market share to rivals AT&T Inc. (NYSE: T) and Verizon Wireless, which also carry the iPhone.

Yin estimates that Sprint will sell 6 million iPhones in 2012, matching its purchase commitment to Apple.

“In the end, Sprint’s iPhone sales may be just right — not too high so as to destroy margins (through the iPhone’s outsized subsidy), but not too low so as to cause share loss and put Sprint’s take-or-pay minimum purchase commitment at risk,” Yin wrote.

The speculation stems from network differences among carriers.

Sprint’s network is undergoing a massive overhaul, but it began dabbling in LTE more recently than its larger competitors, which could put Sprint’s network at a disadvantage to handle the iPhone and put the company in jeopardy, according to investor speculation this week.

“But a next-generation LTE iPhone — a device that is likely to arrive as early as this year — poses new and larger risks,” Moffett wrote in a research note. “We believe an LTE iPhone will likely be badly disadvantaged on Sprint’s network, potentially impairing sales ... at a time when Sprint is subject to a punishing take-or-pay deal with Apple.”

Yin conceded the network issues, but said consumers may not care in the long run.

Because Sprint’s LTE network probably will be under utilized in the beginning, customers may not notice the relative lack of capacity for a while, he said. He also pointed to Verizon, which he said only was able to convert 5 percent of its postpaid subscribers to its LTE network after a year of heavy advertising. According to Yin, that shows LTE technology might not be at the crux of customers’ buying decisions.

“Sprint’s network shortcomings could prevent runaway sales, but consumer ignorance/indifference should keep the product moving,” he wrote in a Friday research note.